On the outskirts of Rennes in northwestern France, workers at a car plant that dates back to postwar reconstruction are worried about becoming victims of Europe’s retreat from automotive leadership.
The factory, which started production in the 1960s to meet booming demand for Citroën models, is now at the epicenter of China’s creeping takeover of the region’s car industry. French workers will start making vehicles for Dongfeng Motor Corp.’s Voyah brand at the site by 2028, blurring lines between Made in Europe and Made in China.
Some 1,500 employees in Rennes, a city famed for its half-timbered houses and medieval center, fear worsening working conditions and a loss of the stability they were used to under plant owner Stellantis NV.
“There are so many concerns around this Dongfeng deal,” said Christine Virassamy, a 53-year-old representative of the CFDT labor union in Rennes. “What happens to us if this partnership doesn’t work out?”
Alongside other agreements, including with Zhejiang Leapmotor Technology Co., Stellantis plans to collaborate with Chinese rivals on making cars in France, Spain and Italy. The strategy includes using Chinese know-how to underpin vehicles with European badges such as Opel, Citroën and Fiat, highlighting how China has overtaken Germany and France on EV technology and software.
The deepening malaise for Europe’s automotive industry this week reached BMW AG. The luxury-car maker now expects to barely eke out a profit this year, undermining the notion that fewer management missteps offered some protection. It plans to respond with additional cost savings, which could mean job cuts.
The news sent the shares tumbling to the lowest level since the darkest days of the Covid pandemic, while an index of Europe’s auto sector has slumped about 40% since a peak in April 2024.
Underscoring the industry’s broader struggles, Mercedes-Benz Group AG will discuss deeper cost cuts with labor representatives, potentially adding additional savings alongside existing labor agreements that run through 2034.
“Developing a ‘world car’ in Germany, producing it in Europe and selling it worldwide: Our business model, which has been successful for decades, no longer works today,” Volkswagen AG Chief Executive Officer Oliver Blume told shareholders on Thursday.
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For workers and cities reliant on car production, the deals signal a loss of control over an industry that Europe pioneered and led for decades. Even if they prop up underused assembly lines, the concern is the decline becoming irreversible.
“When your tech know-how is gone, it becomes nearly impossible to make a comeback down the road,” said Philippe Gilleron, a Peugeot veteran who heads a committee of Stellantis union representatives across Europe. “It’s as if somebody started cooking your meals for you all the time. In the end, you no longer know how to cook yourself.”
It’s not just Stellantis that’s caving in to Chinese pressure. Even Volkswagen is open to making spare capacity available to Chinese rivals — a strategy Bank of America has dubbed a “Trojan horse” by enabling the takeover of Europe’s auto industry from the inside.
Such partnerships “actually increase overproduction by making the manufacture of Chinese-branded vehicles easier and faster,” said Bernard Jullien, an economics researcher at the University of Bordeaux, who has written extensively about the automotive industry.
Stellantis CEO Antonio Filosa has repeatedly pushed back, saying the deals are “a smart way to address excess capacity without closing plants” in Europe and accelerate innovation. The company also isn’t abandoning its European production network and plans to invest billions of euros in factories to assemble new or revamped models.
China’s presence has been building across the region for years. Zhejiang Geely Holding Group bought Sweden’s Volvo Cars in 2010 and later took control of Britain’s Lotus. It also owns a stake in Mercedes and teamed up with the German carmaker to turn the Smart brand into a China-based electric-car venture.
While the stated goal of the Chinese automotive partnerships is to protect European jobs, they stand to hollow out an industry that employs nearly 14 million people. The trend raises questions about the continent’s global standing if its economy becomes increasingly reliant on tech from the US and China.
“The strain upon our continent is profound and growing heavier by the month,” said Mario Draghi, the former European Central Bank president who helped save the euro during the global financial crisis. “The world that once helped Europe generate prosperity is no longer there.”
As the European Union championed free trade and sought to become one of the world’s most open economies, it left internal divisions unresolved. With banking systems and energy networks splintered, the world’s largest trading bloc failed to fully leverage the potential of a market of 450 million people, Draghi told dignitaries including European Commission President Ursula von der Leyen and German Chancellor Friedrich Merz at a ceremony last month in Aachen, Germany.
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The tension between external openness and internal fragmentation is now playing out most clearly in the auto industry. Competing national interests allows China to pry open bridgeheads as countries like Spain see an opportunity to attract investment, effectively swapping German for Chinese engineering.
At the same time, Volkswagen and other European manufacturers are getting crowded out in the world’s largest car market after passing along expertise via joint ventures with state-led Chinese firms. That makes Europe’s auto industry even more dependent on a stagnant domestic market, where new competitors are grabbing share.
China’s push into Europe is also a symptom of strain at home. Years of subsidies have left it with more carmakers than its market can support, forcing them to hunt for growth abroad. EU tariffs on Chinese-built EVs were designed to slow the surge, but have instead created incentives to set up shop in Europe.
BYD Co. — which in 2024 overtook VW as the best-selling carmaker in China after 25 years of the German company’s dominance — has been the most aggressive. It’s ramping up a new factory in Hungary and is interested in scooping up any and all available capacity.
Chery Automobile Co. is taking over a closed Nissan Motor Co. plant in Spain and is in talks to share a UK factory, the Japanese company’s largest in Europe. Meanwhile, Xpeng Inc., a VW partner in China, is ramping up production in Austria with its fourth model.
Xpeng, which targets doubling its share of overseas sales to 20% this year, is in talks with multiple companies about partnerships, according to President Brian Gu. Europe’s new willingness to collaborate is “an opportunity and not a challenge for us,” he said in a Bloomberg TV interview.
China isn’t yet welcome everywhere. Renault SA, known for affordable compacts like the Clio, has no plans to allow Chinese partners in its European plants and is instead borrowing selectively from China’s speed and engineering depth. It’s also pivoting to drone production.
Having fallen behind on EV technology and grappling with overcapacity, Europe has little alternative but to open the gates of its auto factories. The industry is critical for funding everything from social services to defense, and there is a notable lack of alternatives in chips and other high-tech sectors. That puts a premium on preserving auto jobs, even at the expense of local expertise.
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In Italy, some view the deals as marking another stage in the dismantling of Fiat, the national champion that was folded into Stellantis in 2021.
The Agnellis, the carmaker’s founding clan led by Stellantis Chairman John Elkann, have diversified beyond the punishing economics of mass-market autos for years. Chinese partnerships offer a less explosive route than plant closures to further reducing that exposure.
While Prime Minister Giorgia Meloni’s administration is open to Chinese investment, auto workers see the foundations of their livelihoods being eroded as the region loses its grip on the underlying technology.
“Chinese carmakers have built know-how in electric vehicles that is very difficult for European manufacturers to challenge, at least in the short term,” said Samuele Lodi, national secretary of Italian labor union FIOM-CGIL. “They are the result of political choices, planning and investment: all elements that are lacking in Europe, and particularly in Italy.”
Europe’s decline became clear in Volkswagen’s diesel scandal in 2015, when the German automaker was forced to acknowledge that its promise of power and efficiency was a fraud. Despite aggressive investments in new technology, early electric models like the VW ID.3 and the Mercedes EQS have been a flop. More recently, Ferrari NV’s first fully electric model was panned after its unveiling.
While the EU imposes strict rules for state aid to avoid one country getting an edge over another, Beijing has no such restrictions and has built up its auto industry with the full backing of the public sector, including billions in cheap loans.
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France has sought to limit China’s inroads by pushing for a Made in Europe agenda, including requirements for local content. Germany has been more cautious, caught between anxious workers and influential auto executives wary of protectionist measures.
“The German government’s goal is to strengthen the automotive industry for the future,” Finance Minister Lars Klingbeil said during a trip to explore economic cooperation with Canada, which this year opened up its market to Chinese EV imports. “It’s often an emotional debate. The car holds great significance in Germany, and for that reason, we in the government must always strike a careful balance.”
By contrast, Spain is actively encouraging Chinese automakers to come, including Prime Minister Pedro Sánchez traveling to the Asian superpower four times since 2023.
Alongside a range of talks on fresh projects, the country already hosts three partnerships with Chinese companies: Contemporary Amperex Technology Co. Ltd. and Stellantis are building a €4.1 billion ($4.7 billion) battery plant in Zaragoza, Chery has a venture in Barcelona to assemble cars with a local partner, and Santana Motors in Linares is collaborating with Dongfeng, BAIC Motor Corp. and Anhui Coronet.
Locally sourced components — potentially ranging from upholstery, seats and metal stamping to higher tech components like motors and batteries — could offer an opportunity to claw back expertise, according to Santana CEO Edu Blanco.
“Over the years, they learned from their European partners. And that’s what we have to do now: learn from them,” said Blanco. “The industry needs to think what the automobile in 20 years will look like — not think ‘I’m going to catch up and beat them to this race,’ because that’s impossible.”
The risk for Europe is that Chinese automakers may help prop up the industry and secure jobs for a time, but they could also stumble with Europe’s rules and are more likely to pull up stakes than local companies.
In Hungary, a backlash is already brewing. After Viktor Orbán was ousted in April elections, the new government has vowed to crack down on lax oversight in the EV sector. In May, police launched a probe relating to the disposal of suspected toxic soil from BYD’s construction site in Szeged, in what the country’s new environment minister called a “serious breach.”
The Chinese manufacturer has also faced allegations of labor violations, including illegal visa use and grueling work hours, according to an April report by China Labor Watch, a New York-based nonprofit organization. BYD has denied labor or environmental wrongdoing.
But in cities like Rennes, where the auto sector helps fund landmarks like the Musée des Beaux-Arts and the Parc du Thabor, there are few obvious alternatives to accepting Chinese investment. That means anxiety for carmaking families like Virassamy’s.
“All this really leaves a bitter taste in our mouths,” said the Rennes union rep, whose husband also works at the Stellantis plant. “We don’t know where this is heading and are caught in a bind.”